6 min readSep 10, 2022 08:56 AM IST
First published on: Sep 10, 2022 at 03:58 AM IST
Regulatory capture, a turn of phrase used in the academic literature on institutions, refers to independent government agencies that end up identifying with interests of the companies and industries they regulate instead of serving public interest. If, for example, the telecom regulator makes rules that favour incumbents such as Jio or Bharti, competition suffers and, thereby, consumers too. When tariffs on sugar and steel increase, industry gets protected at the expense of consumers. Such decisions don’t happen in a vacuum. Intense pressure is put on the government agency because of the stakes involved. In the Anglo-Saxon system, this activity is called “lobbying” while in Asia it tends to be referred to as acceptable or necessary corruption. The fact is, in both versions, integrity is compromised because there are expedient political, ideological and/or financial reasons for doing so. There is extensive research and documentation on regulatory capture that explains why and how capture occurs.
To establish the existence (or not) of regulatory capture, the role of the government is crucial. In India more so because it is one of the few countries where both public and private sector entities operate and compete in the same market — telecom, banking, steel, electricity and until recently, aviation, to name a few. The character of the independent regulator is, therefore, even more fundamental to maintain a level playing field among the different entities.
Against this background, this article looks at the appointment processes for regulatory agencies that oversee industry, including sports. Such appointments in India and elsewhere are largely the prerogative of the government and rooted in local cultural circumstances. Among others, one objective is to ensure that the capture of the agency by government or by industry is at best eliminated or at worst reduced to a minimum.
There is no fail-safe approach to achieve this. When India initiated liberalisation in 1991, the standards that were admired were those set by the Anglo Saxon logic or the Washington Consensus. Since then evidence has mounted that this consensus is broken and is far from perfect. While there are good intellectual reasons to conjure up a regulatory architecture of our own, it has proven really hard to secure.
Why is this so? Since at least the last five centuries, we have followed the practice of shukrana and nazrana in our societal engagements. The former is an expression of gratitude after a mission is accomplished and the latter an expression of anticipated benefits. Some of this has inevitably spilled over to our professional dealings as well. Appointments to regulatory agencies and commissions often suffer from this challenge.
With more privatisation and disinvestment, India is likely to see more disputes and, perhaps, have more independent regulatory agencies. Likewise, as Indian sports progress and simultaneously become more commercial, sports federations will become even more attractive employment opportunities (think cricket). More sinecures are likely to be available for retiring bureaucrats and judges. Bureaucrats and judges have found methods to navigate the system to their advantage resulting in a sort of institutional capture as opposed to regulatory capture. Institutional capture manifests itself in securing post-retirement appointments to regulatory agencies, and to long and short-term commissions. If bureaucrats and judges are the best persons for the job because of their administrative and legal acumen, more power to them. However, once appointed, they should carefully avoid shukranas, or in other words, resist the temptation of being beholden to the agency that appointed them. They should be guided by the larger mandate of public interest that got them there in the first place.
While we decolonise our institutions, two recent events demonstrate the need to move quickly to achieve our ideal, else we will continue to be pushed by Western gurus. On September 8, the International Olympic Committee (IOC) issued an ultimatum to the Indian Olympic Association (IOA) to “resolve its governance issues” and hold elections by December, failing which the world sports body will ban India. Another recent case involving the international governing body of football, FIFA, the All India Football Federation (AIFF), and the Committee of Administrators (CoA) appointed by the Supreme Court to clean up the mess in Indian football is also instructive. On August 16, FIFA suspended AIFF because of “undue influence from third parties” (read CoA). They threatened to strip India of the hosting rights of the FIFA U-17 Women’s World Cup, scheduled for October 2022. The ban was lifted on August 26 after FIFA received confirmation that the CoA had been terminated and the AIFF had assumed full control. AIFF elections were held on September 2 and former Indian goalkeeper Kalyan Chaubey was elected the president. He will be the first ex-player to hold the top office in AIFF in its 85 years of existence.
That a sportsperson is now in charge sends a signal that former players can be administrators. A presumption that a bureaucrat or a judge is better placed to do so is a self-serving argument that needs to be challenged. As sport administration becomes more demanding and training and skills more complex, the presumption that sports federations can be run by bureaucrats or judges needs a serious rethink. Reform by external pressure is not the best; it has occurred in AIFF and is being forced on IOA. Rather than wait, India should begin the process in other sports federations. For example, A Sharath Kamal could prove to be a good face for the Table Tennis Federation of India. He may not be ready for it just yet, but you get the gist; others can be found if one is sincere about reform.
Kathuria is dean, School of Humanities and Social Sciences, and Professor of Economics, Shiv Nadar Institution of Eminence, a national table tennis selector and a former international player. Views are personal
Rajath Kathuria writes: With more privatisation and disinvestment, India is likely to see more disputes and, perhaps, have more independent regulatory agencies. (Photo: Getty Images/Thinkstock) 
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